TREND ANALYSIS OF MACROECONOMIC

VARIABLES

Submitted by: Hadia Shahid

Submitted to: Ms. Farah Naz
Department: BBA-III
Session: 2016-2020
Assignment no: 01
Date: 4/10/17
 GDP GROWTH OF EQUADOR

Country Name Ecuador

Country Code ECU
Series Name GDP growth (annual
%)
Series Code NY.GDP.MKTP.KD.ZG
1960 [YR1960] ..
1961 [YR1961] 1.543078652
1962 [YR1962] 4.558883964
1963 [YR1963] 3.875658364
1964 [YR1964] 7.811889623
1965 [YR1965] 4.717973158
1966 [YR1966] -0.339525639
1967 [YR1967] 4.621073941
1968 [YR1968] 1.909438399
1969 [YR1969] 4.66923798
1970 [YR1970] 6.87192933
1971 [YR1971] 6.292606196
1972 [YR1972] 5.017640704
1973 [YR1973] 13.95068213
1974 [YR1974] 11.20850963
1975 [YR1975] 10.972154
1976 [YR1976] 7.397187619
1977 [YR1977] 1.604842112
1978 [YR1978] 5.706824945
1979 [YR1979] 3.734048401
1980 [YR1980] 3.708682969
1981 [YR1981] 5.61286412
1982 [YR1982] 0.614845354
1983 [YR1983] -0.336868771
1984 [YR1984] 2.625273268
1985 [YR1985] 3.935001412
1986 [YR1986] 3.464782516
1987 [YR1987] -0.259098708
1988 [YR1988] 5.89046729
1989 [YR1989] 1.005777946
1990 [YR1990] 3.679914053
1991 [YR1991] 4.291342398
1992 [YR1992] 2.114310675
1993 [YR1993] 1.973218079
1994 [YR1994] 4.258250468
1995 [YR1995] 2.252548774
1996 [YR1996] 1.731747514
1997 [YR1997] 4.327864764
1998 [YR1998] 3.266529404
1999 [YR1999] -4.739385791
2000 [YR2000] 1.091801564
2001 [YR2001] 4.0156299
2002 [YR2002] 4.096776659
2003 [YR2003] 2.722877337
2004 [YR2004] 8.211020917
2005 [YR2005] 5.291308267
2006 [YR2006] 4.403526434
2007 [YR2007] 2.190063972
2008 [YR2008] 6.3571306
2009 [YR2009] 0.566491592
2010 [YR2010] 3.525298669
2011 [YR2011] 7.868140919
2012 [YR2012] 5.641962067
2013 [YR2013] 4.946511267
2014 [YR2014] 3.992708509
2015 [YR2015] 0.157743724
2016 [YR2016] -1.467498894

Ecuador ECU GDP growth (annual %) Ecuador ECU GDP

growth (annual %)…
NY.GDP.MKTP.KD.ZG
15

10

0
1975 [YR1975]

1985 [YR1985]

1995 [YR1995]

2005 [YR2005]

2015 [YR2015]
1961 [YR1961]
1963 [YR1963]
1965 [YR1965]
1967 [YR1967]
1969 [YR1969]
1971 [YR1971]
1973 [YR1973]

1977 [YR1977]
1979 [YR1979]
1981 [YR1981]
1983 [YR1983]

1987 [YR1987]
1989 [YR1989]
1991 [YR1991]
1993 [YR1993]

1997 [YR1997]
1999 [YR1999]
2001 [YR2001]
2003 [YR2003]

2007 [YR2007]
2009 [YR2009]
2011 [YR2011]
2013 [YR2013]

-5

-10
 TREND ANALYSIS OF GDP GROWTH RATE OF EQUADOR

Real Economic Growth Rate is the rate at which a nation's Gross Domestic product (GDP)
changes/grows from one year to another. GDP is the market value of all the goods and
services produced in a country in a particular time period. In 1960’s there was acceleration in
manufacturing of consumer durable goods, till 1971 they mad 50 percent of exports affecting
positively on GDP. The discovery of new petroleum fields in 1967 and natural gas deposits in
1970 accelerated Ecuador net foreign exchange earnings from US$43million in 1971 to
US$350 million in 1974. Real GDP increased by more than 9percent in 1970s while the
manufacturing sector alone experienced 12.9 percent average annual GDP growth rate in mid
1970s. But, this economic growth had a negative impact, however, with increased real
imports and external debt also increased drastically from US$324million to US$4.5billion.
In early 1980s the fluctuation in GDP growth rate was due to the flattering of economy and
loosing international market on agricultural products because of climatic changes and decline
in petroleum prices. External debt began to rise and absorbed country’s 60 percent of export
earnings leaving many state-owned companies short of capital. Inflation also rose. However,
in mid 1098s the economy recovered partly because of the increase in international prices of
crude oil and inflation rate also reduced because of tight national government budget, shown
with an upward change in graph. In 1985, Ecuador withdrew from OPEC (Organization of
Petroleum Exporting Countries) in order to avoid subsidies and its exports increased by 70
percent while government revenues by 50percent leading to an increase in growth rate. There
was a sharp decline in 1986 GDP because of drastic decline in international oil prices, leading
to sharp decline in petroleum exports. Affecting a lot of sectors including balance-of-payment
where showed surplus now showed deficit.
In 1987, earthquake destroyed about forty kilometer of pipeline causing a nearly six-month
suspension in crude petroleum production. The repairs cost exceeded the estimated affecting
GDP, causing it to fall with negative growth rate of -0.26%. Economic team concentrated on
implementing monetary reforms which were partially successful. By the end of 1988
unemployment rose to 13percent and inflation reached 86 percent but however, GDP
expanded because of petroleum exports returned to pre-earthquake level showing a positive
growth rate i.e. 5.89%. The government continued its tight money policies, sustaining high
interest rates and strict credit requirements, especially for non-corporate consumers.
In 1999, graph clearly shows a sharp decline a negative growth rate -4.74%, this is due to
severe financial crisis. In 1997-98, global oil price dropped sharply, and international
emerging market was instable. Government mix economic policy of large fiscal deficits and
expansionary monetary policy resulted in 7.3% contraction in GDP, annual year-on-year
inflation of 52.2% and 65% devaluation of the national currency in 1999.
The Noboa government successfully completed the transition from sucres to dollars in 2001.
In December2001, Ecuador negotiated a $205million agreement with IMF in March2003.
Buoyed by higher oil prices, the Ecuadorian economy experienced a modest recovery in
2000-01, with GDP rising 2.3% in 2000 and 5.4% in 2001. GDP growth leveled off to 3.3%
in 2002. Inflation fell from an annual rate of 96.1% in 2000 to an annual rate of 22.4% in
2001. Between 2006 and 2014, GDP growth averaged 4.3 percent, driven by high oil prices
and substantial external financing. During this period poverty declined from 37.6 percent to
22.5 percent. However, between 2014 and 2016 the GDP growth rate fell due to rise in
unemployment. According to LatinFocus Consensus Forecast GDP will contract by 0.3
percent in 2017.

GDP DEFLATOR OF EQUADOR

Country Name Ecuador

Country Code ECU
Series Name GDP deflator (base year
varies by country)
Series Code NY.GDP.DEFL.ZS
1960 [YR1960] 10.15789781
1961 [YR1961] 10.66389896
1962 [YR1962] 10.89304477
1963 [YR1963] 11.35950063
1964 [YR1964] 11.73131651
1965 [YR1965] 23.12981701
1966 [YR1966] 23.61951085
1967 [YR1967] 23.73127541
1968 [YR1968] 23.54729978
1969 [YR1969] 27.11429245
1970 [YR1970] 23.33554145
1971 [YR1971] 21.1235724
1972 [YR1972] 23.26754018
1973 [YR1973] 24.9422177
1974 [YR1974] 38.03178352
1975 [YR1975] 40.15237071
1976 [YR1976] 43.96432179
1977 [YR1977] 52.47613018
1978 [YR1978] 53.67777964
1979 [YR1979] 61.52249779
1980 [YR1980] 74.83331603
1981 [YR1981] 86.42607867
1982 [YR1982] 78.49028573
1983 [YR1983] 67.7804234
1984 [YR1984] 65.12251243
1985 [YR1985] 63.53343219
1986 [YR1986] 54.83543569
1987 [YR1987] 50.06419676
1988 [YR1988] 44.24984048
1989 [YR1989] 46.62516236
1990 [YR1990] 49.33577642
1991 [YR1991] 52.73467612
1992 [YR1992] 55.00397022
1993 [YR1993] 56.45704909
1994 [YR1994] 64.93052914
1995 [YR1995] 68.32156059
1996 [YR1996] 69.33965761
1997 [YR1997] 74.19771401
1998 [YR1998] 71.39105249
1999 [YR1999] 52.6152108
2000 [YR2000] 48.55643831
2001 [YR2001] 62.35339991
2002 [YR2002] 69.8889794
2003 [YR2003] 77.2923822
2004 [YR2004] 80.58646178
2005 [YR2005] 86.81797998
2006 [YR2006] 93.76420914
2007 [YR2007] 100
2008 [YR2008] 113.8473189
2009 [YR2009] 114.5936308
2010 [YR2010] 123.148137
2011 [YR2011] 130.1215933
2012 [YR2012] 136.608484
2013 [YR2013] 140.8365836
2014 [YR2014] 145.6261693
2015 [YR2015] 142.3899405
2016 [YR2016] 141.0851438

Ecuador ECU GDP deflator (base year varies by

country) NY.GDP.DEFL.ZS
160
140
120
100
80
60
40
20
0
1960 [YR1960]

1998 [YR1998]
1962 [YR1962]
1964 [YR1964]
1966 [YR1966]
1968 [YR1968]
1970 [YR1970]
1972 [YR1972]
1974 [YR1974]
1976 [YR1976]
1978 [YR1978]
1980 [YR1980]
1982 [YR1982]
1984 [YR1984]
1986 [YR1986]
1988 [YR1988]
1990 [YR1990]
1992 [YR1992]
1994 [YR1994]
1996 [YR1996]

2000 [YR2000]
2002 [YR2002]
2004 [YR2004]
2006 [YR2006]
2008 [YR2008]
2010 [YR2010]
2012 [YR2012]
2014 [YR2014]
2016 [YR2016]

Ecuador ECU GDP deflator (base year varies by country) NY.GDP.DEFL.ZS

 TREND ANALYSIS ON GDP DEFLATOR OF ECUADOR

Inflation as measured by the annual growth rate of the GDP implicit deflator shows the rate
of price change in the economy as a whole. The GDP implicit deflator is the ratio of GDP in
current local currency to GDP in constant local currency. The trend analysis of GDP deflator
of Ecuador shows different fluctuations. During 1960-70 the inflation rate was 1.29, the
production was high especially with durable consumer goods and because of petroleum
discovery in 1967. In next decade, the inflation rose more to 2.20 due to increased external
debt, the prices of goods increased.
The decade of 1980-1990 showed negative inflation measure i.e. -0.34. This was caused by a
number of events caused in that span of time. The GDP deflator chart also showed a
downward trend in accordance with the negative inflation. This could be due to the climatic
changes or the international change in prices of crude oil and petroleum. But the earthquake
however had an impact on economy since unemployment rose to 13 percent and inflation to
86 percent. But still, the GDP expanded due to the petroleum exports.
Between 1990 and 2000, the GDP deflator fall so was the inflation which stayed negative at -
0.015%. In this period, the oil prices fell sharply around the globe. The downward trend in
the GDP deflator is also because of government mix and inappropriate fiscal and monetary
policies. Another contribution to this negative inflation could be due devaluation of national
currency in 1999. The next decade was however flourishing for Ecuador, as it could be
analyzed from the upward trend on the chart. Ecuador changed its currency to dollar. The
economy of Ecuador recovered greatly in the next decade due to high oil prices and
recovered some of its debt by negotiating IMF. There was a positive change in GDP growth
as well as GDP deflator.
The last decade till present shows slow increase and the GDP deflator trend has also fell a tad
bit, this is due to rise in unemployment and inflation that had increased in this time. The
experts predicted the decrease in GDP annual growth rate in 2017.

Conclusion:
To conclude the trend analysis it can be noted that oil and petroleum dominated and affected
the Ecuador economy ever since being discovered. There had been fluctuations and drastic
changes in GDP growth rate, some positive some negative. These were mostly because of
global influence on oil prices, which directly or indirectly affected the Ecuador economy
either in form of inflation or unemployment. Along the way, financial crisis of 1999 greatly
affected the economy as a whole, added up with the earthquake the economy faced a lot of
obstacles. The external debt and its deficit made government to implement some policies
some of which were successful while others were not. The change of currency of Ecuador
helped its economy in recovering the impacts of 1999. Overall, Ecuador economy had a lot of
fluctuations.